Nice compilation of long term stock return info

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Let's compare returns for the last big market top and bottom. An investor in 1968, a market top, had to wait until 1983, fourteen years to just breakeven after inflation. If they waited until 1987, twenty years, their annual return was 4.19% after inflation, and their compound total return was 489.24%. If they waited until 1992, twenty-five years, their annual return was 5.83%, compounded to1132%. The big bull market ending at an all-time Dow high of 14150 began in 1982 and ended in October 2007 if we consider the 2000-2002 sell-off as a correction. An investor in the market from 1981 through 2000 received a whopping after inflation return of 12.91% annually, and a compound total return of 1741%; it was the best twenty-five years in U.S. market history. Despite a vicious bear market from October 2007 through March 2009, investors are generally optimistic, assuming that the 80% gain in the S&P 500 since the 2009 low is a new bear market (should be "bull")and not a bear market rally. Yet, an investor in Japan at its peak in 1989 still has not recovered to breakeven over 20 years later in 2010 despite one bear market rally of over 100%. Japanese residential real estate and equities are still down around 60-70%. Time of market entry matters yet there's not evidence markets can be timed.

In 1997, Peter L. Bernstein, author of several popular and well-respected books on investing, cautioned investors about employing the long run as a benchmark because the long run is not a homogeneous state of the world, a smooth and straight line into the future. A very large portion of the vaunted equity returns over the riskfree return, the equity risk premium, is accounted for by just 32 years out of 200 years since 1800, 1950-1981. Bonds outperformed stocks 43% of the time, and stocks were superior over the very long run, but with a high degree of uncertainty during periods of time shorter than 150 years. He concludes that, "...the long run can tell us perilously little about what kinds of environments lie ahead...we have to accept uncertainty."

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